The initial public offering for The Container Store (TCS 4.09, -0.22, -5.1%) in November 2013 was wildly successful. The stock priced at $18.00 per share -- the high end of an upwardly revised range -- and then opened for trading at $30.00. By January 2014, the stock was pushing $50.00. And then, the good times stopped rolling. On Friday, shares of TCS closed at $4.31.
It has been an abysmal ownership experience for most shareholders and today it is getting worse.
Shares of TCS are down 5.1% after the company cut its FY17 guidance in conjunction with the news that it completed the amendment of its senior secured term loan credit facility.
The features of the amended and restated facility include an extension of the maturity date from April 6, 2019, to August 18, 2021, and a reduction in the aggregate principal amount of the term loan to $300 million.
In turn, there was an increase in the applicable interest rate margin for LIBOR loans to 7.00%, and for base rate loans to 6.00%. Under the original senior secured term loan facility entered into on April 6, 2012, the interest rate on borrowings was LIBOR + 3.25%, subject to a LIBOR floor of 1.00%.
Due to the increased interest expense and debt extinguishment costs, The Container Store expects its adjusted net income for fiscal 2017 to range from $0.27 to $0.40 per share versus its prior guidance of $0.37 to $0.49 per share. For fiscal 2016, The Container Store reported adjusted net income of $0.27 per share.
The reduced earnings guidance on the higher interest expense goes to show some of the earnings-related risk other companies face with rising interest rates. For The Container Store, though, that reality has arrived and it is another disappointing reality that is pressuring its downtrodden stock even further.